Alopecia or hair loss is a transient but very frequent side effect observed in patients subjected to chemotherapy. This unpleasant side effect has been proved to have a tremendous impact on the quality of life of cancer patients, in terms of moral and preparedness for treatment. The synthetic immunomodulator AS101 (ammonium trichloro [dioxoethylene-o-o'] tellurate was recently shown to protect humans and rodents against cytosine arabinoside (ARA-C)-induced alopecia. The major aim of our studies was to elucidate the mechanism by which AS101 exerts its protective effects against chemotherapy-induced alopecia. We determined that AS101 strongly induced the expression of keratinocyte growth factor (KGF), a mesenchymally-derived epithelial mitogen that plays a role in hair follicle growth. The effect of AS101 on KGF production was time and dose-dependent and was observed at the mRNA and biologically active protein levels. AS101 had no effect on the expression of KGF receptors (KGFR) and did not promote KGF expression by epithelial cells. In vivo studies demonstrated that administration of AS101 2 hr prior to the onset of ARA-C protected neonatal rats against chemotherapy-induced alopecia. Analysis of skin biopsies derived from AS101-treated animals revealed a time-dependent elevation in KGF mRNA and correlated with protection against alopecia. Furthermore, daily injections of AS101 was sufficient to promote hair growth in hairless athymic nu/nu mice, an effect also observed when daily injections of purified recombinant KGF was given to the same animals. The temporal elevation of KGF expression suggests a possible role for this growth factor as a paracrine endogenous mediator of the effects of AS101 and indicate that pharmacological agents such as AS101, in conjunction with KGF, could be further developed as useful agents in the treatment of chemotherapy-induced alopecia.